Tullett Prebon Agrees to Buy Icap’s Hybrid Voice Broking, Information Business

Tullett will also take on gross debt of £330m with the acquisition and the share issue means the deal is expected to be dilutive in first year. The combined company will generate revenue of more than $2.3 billion, according to a statement by Tullet Prebon, making it the biggest firm in the voice broking business.

Tullett says it intends to maintain its annual dividend of 16.85 pence a share during the integration period, “with an ambition to grow the dividend over time”.

Commenting on the announcement, the CEO of Tullett Prebon plc (LON:TLPR), John Phizackerley, said, “Inter-dealer brokers continue to play a vital role at the heart of the global wholesale OTC markets”.

ICAP’s remaining businesses put it in competition with traditional exchanges like the London Stock Exchange to a large extent.

The Post Trade, Risk and Information and Electronic Markets divisions of ICAP will operate under a new group holding company ICAP NewCo which will be positioned as a leader in the financial technology space, ready to capitalise on the many opportunities it sees in these markets. The Organization also manages an information sales company, Tullett Prebon Information, which rolls up, cleanses, collates and distributes realtime information to data suppliers, plus a Risk Management Services business, which provides customers with post-trade and multi-product duplicate services.

ICAP chief executive Michael Spencer hailed the deal as a “win-win”.

The sale redeemed the group’s half-year results, which reported revenues were down four per cent in the six months ended 30 September, from £620m the year before to £595m.

Icap has 28% of the interdealer broking market, with Tullett accounting for 20%. Barclays upped their target price on shares of Tullett Prebon Plc from GBX 365 ($5.49) to GBX 385 ($5.80) and gave the stock an equal weight rating in a research report on Wednesday, July 29th. He will be available to advise the Board of Enlarged Tullett Prebon but will not be a member of the Board.

“The £1.1 billion all-share deal is an attempt to fight a trend of waning profits within an increasingly automated industry and the negative share price reaction likely comes from markets factoring in a combination of acquisition risk and forced dilution from new shares being issued to pay for the deal”, writes Mike van Dulken, head of research at Accendo Markets.

On completion of the deal, a total of 44 percent will be owned by current shareholders of Tullett Prebon plc (LON:TLPR), 36.1 will be owned by ICAP shareholders and 19.9 percent will be owned by ICAP plc (LON:IAP) itself.